HP Delivers Surprise Beat but Signals Trouble Ahead as Memory Costs Double

"We are pleased to report a strong first quarter, highlighted by robust growth in Personal Systems, including the continued momentum in AI PCs. Our performance reflects the strength of our portfolio and our disciplined execution of our Future of Work strategy, even as we navigate industry-wide headwinds."

"Personal Systems was the engine: AI PCs reached 35% of total PC shipments in Q1, up from 30% the prior quarter, pushing segment revenue to $10.25 billion, up 11% year over year. Consumer was the standout within that, up 16%."

"Margin pressure showed up as expected. Operating income fell 10.2% year over year to $759 million even as revenue grew. The culprit: DRAM and NAND prices rose roughly 100% sequentially, pushing memory and storage costs from 15-18% to approximately 35% of PC bill of materials."

HP Inc. reported Q1 earnings with non-GAAP EPS of 81 cents, beating consensus by 5%, and revenue of $14.44 billion, exceeding estimates by $500 million with 6.9% year-over-year growth. AI PCs drove Personal Systems segment revenue to $10.25 billion, up 11% year-over-year, reaching 35% of total PC shipments. However, operating income declined 10.2% despite revenue growth due to sequential DRAM and NAND price increases of approximately 100%, raising memory and storage costs from 15-18% to 35% of PC bill of materials. Printing revenue declined 2% with hardware units down 6%. Management maintained full-year non-GAAP EPS guidance of $2.90 to $3.20 but signaled the low end, projecting Q2 EPS of $0.70 to $0.76. HP outlined a mitigation strategy targeting $1 billion in gross run-rate savings by FY2028 through supplier agreements, alternative sourcing, and pricing actions.

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